This Saturday, British Midland Regional Limited, based in the East Midlands in the United Kingdom and operating as Flybmi, announced that it had ceased operations with immediate effect and would file for bankruptcy.

The airline, which can trace its history back to a Royal Air Force Volunteer Reserve air training school established by Captain Roy Harben in 1938, has gone through a number of evolutions and revolutions over the decades. These have led to many changes of ownership and name, as well as changes in the scope of service. At the time of closure, Flybmi had a fleet of 17 regional jets serving routes to 25 European cities.

In a statement issued at the time of closure, a spokesperson directly attributed the airline's failure to Brexit uncertainty.

“The airline has faced several difficulties, including recent spikes in fuel and carbon costs, the latter arising from the EU’s recent decision to exclude UK airlines from full participation in the Emissions Trading Scheme. These issues have undermined efforts to move the airline into profit. Current trading and future prospects have also been seriously affected by the uncertainty created by the Brexit process, which has led to our inability to secure valuable flying contracts in Europe and lack of confidence around bmi’s ability to continue flying between destinations in Europe. Additionally, our situation mirrors wider difficulties in the regional airline industry which have been well documented.

“Against this background, it has become impossible for the airline’s shareholders to continue their extensive program of funding into the business, despite investment totaling over £40m in the last six years. We sincerely regret that this course of action has become the only option open to us, but the challenges, particularly those created by Brexit, have proven to be insurmountable.”

Flybmi employed 376 people, but they may not be unemployed for long. Ryanair’s Chief Operations Officer, Peter Bellew, posted a recruiting notice on Twitter this Sunday offering Flybmi employees “early start dates for engineering, pilots and specialist roles.” He also said that Ryanair recruitment staff would be in place at East Midlands airport on Monday to assist any former Flybmi employees interested in job openings.

Hundreds of the airline's passengers were caught by surprise, some first hearing of the closure at the airport, with flight cancellations at the terminal. Others were stranded away from home. Flybmi notified passengers that they should make any claims for tickets purchases through their payment card issuer, travel insurer, or a code-sharing airline partner. Flybmi had existing codeshare agreements in place with Lufthansa, Brussels Airlines, Turkish Airlines, Loganair, Air France and Air Dolomiti. The airline said that it would offer no compensation or reimbursement to passengers affected by the closure or rebook passengers on alternative flights.

As reported by the BBC, the UK’s independent consumer ratings and advice association, Which?, had heard claims from consumers that Flybmi was still actively selling tickets in the hours before announcing its closure.

Brexit or bust?

It’s difficult to say whether Brexit alone is to blame for the closure of this regional airline. It has had a history of operating losses that pre-date the Brexit vote. The recent failure of other small carriers in the UK and in Europe would suggest that there are other market factors at play, including inadequate capacity, higher operating costs, and, in some cases, a degree of mismanagement.

However, Montserrat Barriga, Director General of ERA (European Regions Airlines association), gave credence to the impact of Brexit on the fate of the airline writing on Twitter, “Very sad news @flybmi, uncertainty and unfairness surrounding Brexit is just impossible to understand.”

The ERA has warned of the need for clear air services agreements between the EU and the UK in anticipation of Brexit.

“ERA continues to urge both parties to work towards a detailed, wide-reaching reciprocal aviation agreement to secure European connectivity to continue to fulfill business and people’s needs,” Barriga said in a statement on Brexit negotiations in December of last year.

Brexit challenges the EU’s biggest players

A “no-deal” Brexit poses a challenge for Europe’s largest carriers with a large share of UK investors. To retain their operating license in the EU, airlines must prove that they are more than 50% owned and controlled by EU investors. This rule has led easyJet, Ryanair and IAG to draft plans for a no-deal Brexit scenario.

EasyJet has said that, in a no-deal scenario, UK investors could no longer be counted towards the 50 percent EU ownership requirement. The airline expects to be at 49% ownership by EU-nationals—excluding UK nationals—by April 7, 2019. EasyJet is asking that the EU allow a grace period to adjust ownership levels within the requirements. In the event of no-deal, where the EU might not allow extra time, the airline’s Board has plans to suspend shareholder voting rights by a number which will adjust the level of ownership to the minimum requirement of 50% +1 share.

Ryanair has put similar plans in place. The airline’s Board can, under Ryanair’s Articles of Association, require non-EU shareholders to sell shares to meet the EU requirement in a no-deal scenario, but Ryanair has no plans to do so for now. Instead, Ryanair’s plans to cut voting rights for UK shareholders and require any UK shareholders who choose to sell their shares to sell these shares to EU-nationals.

The Spanish airline group, headquartered in London, owns British Airways, Iberia, Vueling, Aer Lingus and LEVEL. Last week, the company announced that it would cap its non-EU shareholders at current levels of 47.5%, but issued no restrictions for UK investors.

“IAG confirms that Relevant UK Persons are not and will not be treated as Relevant Non-EU Persons and, therefore, are not and will not be subject to the restrictions on share acquisitions set out in this announcement, unless IAG notifies shareholders otherwise IAG has no plans to issue such a notification,” IAG wrote in a statement published on February 11.

However, an EU official recently described this plan to the Financial Times as “totally absurd.”